With massive financing and secondary market rounds becoming more frequent, billion dollar plus valuations of private tech companies have also increased. In fact, there are 26 U.S.-based private companies in the Tech IPO Pipeline that have raised a financing round at a valuation of $1 billion or more. It’s a figure sure to spark bubble chatter especially given that there have only been 45 billion dollar “unicorn” tech exits since 2004 through October 2013.
In other words, in the almost 10 years from 2014 till date, there have been 45 billion dollar exits and right now, there are 26 U.S.-based companies with valuations over $1 billion. Of course, things may not be frothy and “this time is different” might hold, but we wanted to dive into the numbers a bit to understand how today’s situation compares to the past.
While the biggest checks by venture capital investors have moved decidedly toward the enterprise and the exits are also increasingly enterprise, the billion dollar club of today is largely consumer tech companies. Of the 26 firms, 14 are companies building products used by everyday consumers including Pinterest, Uber, and Snapchat. The full list of tech IPO pipeline companies in the billion dollar valuation club is below.
But breaking down historical CB Insights venture capital data reveals that B2C firms have taken just 15 of the $1B+ tech exits between 2004 and October 2013. In other words, 1/3 of previous billion dollar plus exits have been to consumer companies while today, the ratio stands at more than 1 of 2. If we were to assume that ratio holds, could it be that enterprise firms are underrepresented on the current list of $1B+ companies? If we assume that the 1 of 3 ratio of consumer: enterprise will hold in the future, that would suggest 28 enterprise-oriented companies with a billion dollar valuation. Of course, that may be possible and may just be a function of enterprise companies not being as keen to leak valuation figures as consumer companies. If that is the case, that means we currently should have 42 billion dollar plus companies in the Pipeline. Again, compared to 45 VC-backed billion dollar exits in the past ~10 years, the number does seem high.
Another plausible theory is that some of the current consumer firms on the list may be massively overvalued?
What do you think? Is this time different? Are consumer tech valuations overheated?